The last week has been interesting for investors as two billionaire CEOs, Warren Buffett of Berkshire Hathaway and Elon Musk of Tesla went head to head with their views on what creates a competitive advantage for companies.
Buffett and his partner Charlie Munger popularized the term ‘moat’ which refers to the competitive advantage that one company has over another, but Musk has different views.
During a Tesla Q1 earnings call, Musk said “First of all, I think moats are lame. If your only defence against invading armies is a moat, you will not last long. What matters is the pace of innovation. That is the fundamental determinant of competitiveness.”
He also went on Twitter and said, “Saying you like “moats” is just a nice way of saying you like oligopolies”. Ouch, I guess that leaves out our big banks the Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB).
Surely there must be companies that are both highly innovative and have a distinct competitive advantage. With that in mind, here are 3 Australian companies that I think both Warren Buffet and Elon Musk would like:
SEEK Limited (ASX: SEK)
Seek owns the top online employment listing sites in Australia, New Zealand, Brazil & Hong Kong which makes it the first port of call for employers and job seekers. The company is also innovating by investing heavily in its artificial intelligence (AI) capabilities to assist job recommendations.
Xero Limited (ASX: XRO)
Xero, the fast-growing accounting software provider gets its moat from the ‘stickiness’ of its product. The cost and effort of switching accounting packages keeps customers locked in. Its highly innovative cloud-based software integrates well with third party applications. The company has successfully targeted the niche SME space and taken its concept global.
Cochlear Limited (ASX: COH)
As the undisputed global leader in the production of hearing implants, Cochlear has a clear advantage in this space. It’s also highly regarded for its innovation which provides it with valuable intellectual property.
Elon Musk and Warren Buffett are not the only billionaires with an eye for good investments. Have a look at the new technology that this Japanese billionaire is investing into.
When a veritable investing and entrepreneurial genius speaks, it pays to listen.
In fact, he's now preparing a $100B "war chest" to invest entirely in this "terrifying" new technology, which could spell huge profits for investors.
Kevin Gandiya owns shares of Twitter.
You can follow Kevin on Twitter @KevinGandiya.
The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares), Tesla, and Twitter. The Motley Fool Australia owns shares of National Australia Bank Limited and Xero. The Motley Fool Australia has recommended Berkshire Hathaway (B shares), Cochlear Ltd., and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.